Time Weighted Rate of Return for portfolios

[lucabol]

FM gives you the Money Weighted Rate of Return (ROI in FM-speak) for portfolios, but the TWRR is often more relevant (if you don't have control over the cashflows in/out of the portfolio). This is the rate used for mutual funds performance presentations.

Fund Performance (in FM-speak) works for single investments, but for portfolios it reports the simple un-weighted average of the components rates, which is not very useful. It should instead calculate the TWRR using the cashflows in/out of the portfolios (as the ROI calculation does).

Same considerations apply to Asset/Investment Goals. They all suffer from the same problem (you get a simple average of the components instead of the correct TWRR).

Have I missed how to obtain this statistics?

A description of TWRR is here: http://www.fpai.net/time%20weighted%20r ... return.htm

.luca

[Mark]

Hi Luca,

This has been incorporated into v10. v10 no longer has a "Fund Performance" yield. That has been replaced by a "Time-Weighted Return" (TWR). The new TWR is the same as the old "Fund Performance" yield in the case of a single investment, but for other more complicated objects like portfolios, asset types, etc, it factors out external cash flows as documented by GIPS:

http://www.gipsstandards.com/standards/ ... evised.pdf

Basically, you calculate the return between each external cash flow, and then geometrically link these returns together.

The new v10 true Time-Weighted Returns are available for any object, such as investment, symbol, sub-portfolio, asset type, investment goal, or investment type.

[lucabol]

Please let me know if you need a beta tester.

I think you still have my email.

.luca